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Summary How does foreign aid affect recipient countries' political institutions? Two competing hypotheses offer contradictory predictions. The first sees aid, when delivered correctly, as an important means of making dictatorial recipient countries more democratic. The second sees aid as a corrosive force on recipient countries' political institutions that makes them more dictatorial. This paper offers a third hypothesis about how aid affects recipients' political institutions that we call the “amplification effect.” We argue that foreign aid has neither the power to make dictatorships more democratic nor to make democracies more dictatorial. It only amplifies recipients' existing political institutions. We investigate this hypothesis using panel data for 124 countries between 1960 and 2009. Our findings support the amplification effect. Aid strengthens democracy in already democratic countries and dictatorship in already dictatorial regimes.

In our paper we establish foreign direct investment (FDI) as a major determinant of media freedom. Global integration can strengthen the media sector financially, make it technologically enhanced and can also improve the economic environment as a whole. This, in turn, would work towards the enhancement of media freedom. The sample includes high, middle and low income economies. Using a panel of 115 countries over a period of 20 years, our results reveal that FDI is an absolute necessity for a free and efficient media. The results are robust to various alternate specifications and inclusion of additional control variables. Copyright 2009 Blackwell Publishing Ltd.

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